Oi could sell off its mobile operations in order to exit bankruptcy protection.
The operator filed for bankruptcy protection in June after failing to restructure its debt. Even after two months, the proposal it has now filed with Brazil’s courts in order to meet its deadline has been described as “little more than a placeholder” that has not been approved by bondholders.
Oi’s submitted proposal imposes a 70% “haircut” on bondholders, writing down the value of the debt to 30% of the outstanding totals. If the bonds aren’t redeemed within three years, they can be converted into as much as 85% of Oi’s equity.
An anonymous analyst was quoted by Reuters as saying that the “best case scenario” would see investors having 31% of the debt paid plus 4% interest, while the worst case would see them assume 85% of the assets of the troubled operator, along with all associated shareholder liabilities. The proposal also outlined other possibilities, such as granting priority to creditors who could pledge new funds to help Oi exit bankruptcy protection.
In addition to attempting to bring in new capital, Oi could also attempt to sell assets such as its mobile unit and associated real estate. However, some of the operator’s shareholders are reportedly against disposing of the mobile operations. Other assets that could be sold off include holdings in African and Asian operators, a fibre-optic network in Sao Paulo, and infrastructure including towers and data centres.
Oi is Brazil’s fourth-placed operator, whose 47.6 million connections give it a 19% share of the market. If the mobile unit is put up for sale, there is no obvious bidder among the big three of America Movil’s Claro, Telefonica’s Vivo and TIM Brasil, although TIM has been mooted for a potential buy in the past. Given that there is a difference of just 10 million subscribers between first and third place, obtaining Oi’s subscribers would be a major boon for any of the operators.
Oi’s former CEO departed earlier this year after shareholders pushed back against a proposal to hand a substantial holding in Oi over to bondholders, as this would have reduced their stakes. The operator has been hit by Brazil’s weakening economy and has faced issues with regulation over its fixed-line infrastructure. Its mobile success has been muted in comparison to its rivals.